-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HLsBXIhIfyzNnuKBEN/AlNjfsj1tlpStnrwbyd/PtCyqzS+udkJ9OuRHtm5xX4BY keu4C8uGldD/IqRC5GuiqA== 0000912057-97-004639.txt : 19970222 0000912057-97-004639.hdr.sgml : 19970222 ACCESSION NUMBER: 0000912057-97-004639 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970212 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: EIP MICROWAVE INC CENTRAL INDEX KEY: 0000026782 STANDARD INDUSTRIAL CLASSIFICATION: INSTRUMENTS FOR MEAS & TESTING OF ELECTRICITY & ELEC SIGNALS [3825] IRS NUMBER: 952148645 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-05351 FILM NUMBER: 97528044 BUSINESS ADDRESS: STREET 1: 3 CIVIC PLAZA STE 265 CITY: NEWPORT BEACH STATE: CA ZIP: 92660 BUSINESS PHONE: 7147201766 MAIL ADDRESS: STREET 1: 3 CIVIC PLAZA STE 265 CITY: NEWPORT BEACH STATE: CA ZIP: 92660 FORMER COMPANY: FORMER CONFORMED NAME: JENOA INC DATE OF NAME CHANGE: 19800103 FORMER COMPANY: FORMER CONFORMED NAME: DANA ELECTRONICS INC DATE OF NAME CHANGE: 19780228 FORMER COMPANY: FORMER CONFORMED NAME: DANALAB INC DATE OF NAME CHANGE: 19750224 10-Q 1 10-Q - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM 10-QSB (Mark One) [ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1996 [ ] Transition Report Under Section 13 or 15(d) of the Exchange Act For the transition period from to
COMMISSION FILE NUMBER 0-5351 EIP MICROWAVE, INC. (Exact name of small business issuer as specified in its charter) Delaware 95-2148645 (State or other jurisdiction of incorporation (IRS Employer Identification or organization) No.) 3 Civic Plaza, Suite 265, Newport Beach, 92660 California (Address of principal executive offices) (Zip Code)
(714) 720-1766 (Issuer's telephone number) (Former name, former address and former fiscal year, if changed since last report) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [ X ] NO [ ] OUTSTANDING COMMON STOCK: As of February 7, 1997, Registrant had only one class of common stock, and had 424,907 shares of this $.01 par value common stock outstanding. Transitional Small Business Disclosure Format (check one): YES [ ] [ X ] Total Number of Pages: 13 Exhibit Index 12 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- EIP MICROWAVE, INC. FORM 10-QSB QUARTER ENDED DECEMBER 31, 1996 PART I FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements Condensed Consolidated Balance Sheets as of December 31, 1996 (unaudited) and September 30, 1996 Page 3 Condensed Consolidated Statements of Operations and Retained Earnings for the three months ended December 31, 1996 and 1995 (unaudited) Page 4 Condensed Consolidated Statements of Cash Flows for the three months ended December 31, 1996 and 1995 (unaudited) Page 5 Notes to condensed consolidated financial statements Page 6 Item 2. Management's Discussion and Analysis of Results of Pages 7-9 Operations and Financial Condition
PART II OTHER INFORMATION Item 2. Changes in Securities Page 10 Item 3. Defaults Upon Senior Securities Page 10 Item 4. Submission of Matters to Vote of Security Holders Page 10 Item 6. Exhibits and Reports on Form 8-K Page 10 Signatures Page 11 Index to Exhibits Page 12
2 EIP MICROWAVE, INC. PART I--FINANCIAL INFORMATION ITEM 1--CONDENSED CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS EXCEPT SHARE DATA) ASSETS
DECEMBER 31, SEPTEMBER 30, 1996 1996 ------------- ------------- (UNAUDITED) ASSETS Current assets: Cash and cash equivalents......................................................... $ 86 $ 216 Short-term investments............................................................ 26 324 ------ ------ 112 540 Accounts receivable, net.......................................................... 453 686 Inventories....................................................................... 1,002 1,067 Prepaid expenses.................................................................. 67 59 ------ ------ Total current assets.......................................................... 1,634 2,352 Property and equipment, net......................................................... 640 631 ------ ------ $ 2,274 $ 2,983 ------ ------ ------ ------ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable.................................................................. $ 455 $ 706 Accrued liabilities............................................................... 499 546 Advanced payments from customers.................................................. 9 190 Bank borrowings................................................................... 185 185 Current portion of obligations under capital leases............................... 34 34 ------ ------ Total current liabilities..................................................... 1,182 1,661 ------ ------ Long term obligations under capital leases.......................................... 87 95 Commitments and contingencies Stockholders' equity: Common stock, $.01 par value; authorized--10,000,000 shares; 424,907 issued and outstanding..................................................................... 5 5 Additional paid-in capital........................................................ 848 848 Retained earnings................................................................. 152 374 ------ ------ Total stockholders' equity.................................................... 1,005 1,227 ------ ------ $ 2,274 $ 2,983 ------ ------ ------ ------
3 EIP MICROWAVE, INC. PART I/ITEM 1--CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS (DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA, UNAUDITED)
THREE MONTHS ENDED ---------------------------- DECEMBER 31, DECEMBER 31, 1996 1995 ------------- ------------- Net sales............................................................................ $ 1,258 $ 1,560 ------ ------ Costs and expenses: Cost of sales...................................................................... 793 980 Research, development and engineering.............................................. 216 201 Selling, general and administrative................................................ 466 532 Interest and other, net............................................................ 5 (18) ------ ------ Total costs and expenses....................................................... 1,480 1,695 ------ ------ Net loss............................................................................. (222) (135) ------ ------ Retained earnings at beginning of period............................................. 374 867 ------ ------ Retained earnings at end of period................................................... $ 152 $ 732 ------ ------ ------ ------ Net loss per share................................................................... $ (.52) $ (.32) ------ ------ ------ ------ Weighted average common shares outstanding........................................... 425 423 ------ ------ ------ ------
4 EIP MICROWAVE, INC. PART I/ITEM 1--CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CCNTINUED) CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS INCREASE (DECREASE) IN CASH (DOLLARS IN THOUSANDS, UNAUDITED)
THREE MONTHS ENDED ---------------------------- DECEMBER 31, DECEMBER 31, 1996 1995 ------------- ------------- Cash flows from operating activities: Net loss........................................................................... $ (222) $ (135) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization.................................................... 76 43 (Gain) loss on sale of capital equipment......................................... (36) (45) Change in assets and liabilities:................................................ Accounts receivable, net....................................................... 233 272 Inventories.................................................................... 65 17 Prepaid expenses............................................................... (8) 57 Accounts payable............................................................... (251) (13) Accrued liabilities............................................................ (47) (52) Advanced payments from customers............................................... (181) -- ----- ----- Cash provided by (used in) operating activities...................................... (371) 144 ----- ----- Cash flows from investing activities: Purchase of short-term investments................................................. -- (6) Sale of short-term investments..................................................... 298 -- Capital expenditures............................................................... (85) (218) Proceeds from the sale of capital equipment........................................ 36 52 ----- ----- Cash (used in) provided by investing activities...................................... 249 (172) ----- ----- Cash flows from financing activities: Repayment of obligations under capital leases...................................... (8) -- ----- ----- Cash used in financing activities.................................................... (8) -- ----- ----- Decrease in cash and cash equivalents................................................ (130) (28) Cash and cash equivalents at beginning of period..................................... 216 126 ----- ----- Cash and cash equivalents at end of period........................................... $ 86 $ 98 ----- -----
5 EIP MICROWAVE, INC. PART I/ITEM 1--CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (a) The condensed consolidated financial statements presented in this Form 10-QSB have been prepared from the accounting records without audit on a basis consistent with the financial statements included in the Company's annual report filed with the Securities and Exchange Commission for the preceding fiscal year. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. The information furnished reflects all adjustments and disclosures which are, in the opinion of management, of a normal, recurring nature, and necessary for a fair statement of the results for the interim periods. This report should be read in conjunction with the Company's 1996 Annual Report on Form 10-KSB. The results of operations for the interim periods presented are not necessarily indicative of the results expected for the entire year. (b) Composition of certain balance sheet captions (dollars in thousands):
DECEMBER 31, SEPTEMBER 30, 1996 1996 ------------ ------------- (UNAUDITED) Accounts receivable: Trade......................................................... $ 503 $ 736 Less allowance for doubtful accounts.......................... (50) (50) ------------ ------------- $ 453 $ 686 ------------ ------------- Inventories: Raw materials................................................. $ 622 $ 719 Work-in-process............................................... 336 320 Finished goods................................................ 44 28 ------------ ------------- $ 1,002 $ 1,067 ------------ ------------- Property and equipment: Cost.......................................................... $ 5,374 $ 5,319 Accumulated depreciation...................................... (4,734) (4,688) ------------ ------------- $ 640 $ 631 ------------ -------------
(c) The calculation of net income (loss) per share is based upon the weighted average number of shares outstanding during the year. As a result of the losses incurred during the three months ended December 31, 1996 and 1995, the common equivalent shares were antidilutive and, accordingly, were excluded from the computation of loss per share for those periods. 6 EIP MICROWAVE, INC. PART I/ITEM 2--MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION THE FOLLOWING DISCUSSION CONTAINS TREND INFORMATION AND OTHER FORWARD-LOOKING STATEMENTS THAT INVOLVE A NUMBER OF RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THE COMPANY'S HISTORICAL RESULTS OF OPERATIONS AND THOSE DISCUSSED IN THE FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY INCLUDE, BUT ARE NOT LIMITED TO, THOSE IDENTIFIED UNDER THE HEADING "CERTAIN FACTORS" BELOW. RESULTS OF OPERATIONS Net sales for the three months ended December 31, 1996, were $1,258,000, a 19% decrease from sales of $1,560,000 in the same period last year. The decrease in sales for the period was primarily attributable to lower sales of frequency counters. Gross margin of 37% in the first fiscal quarter of 1997 was the same as gross margin in the first fiscal quarter of 1996. The lower average selling price on one government program affected gross margin for both periods. Incoming orders for the first fiscal quarter were $876,000, a 33% decrease from the same period a year ago. Backlog at December 31, 1996, was $381,000, a 59% decrease from the end of the first fiscal quarter last year. The decrease in orders and backlog resulted primarily from a decrease in orders for VXIbus products. Research, development and engineering expenses increased 7% to $216,000 in the first fiscal quarter of 1997, compared to $201,000 for the same quarter last year. The increase in research, development and engineering expenses was due to new product development expenditures, primarily to support a new frequency measurement product currently under development. Selling, general and administrative expenses decreased 12% to $466,000 during the first fiscal quarter of 1997, compared to $532,000 for the same quarter last year. The decrease in selling, general and administrative expenses is due primarily to decreased commission expense resulting from decreased sales volume, compared to the same period last year. The Company recorded a net loss of $222,000 for the first fiscal quarter of 1997, as compared to a net loss of $135,000 recorded during the same period last year. A gain on the sale of capital equipment of $36,000 is included in the first quarter net loss. The increase in the loss for the period, compared to the same period last year, is primarily attributable to lower sales of frequency counters and an increase in research development and engineering expenses for a new frequency measurement product currently under development. FINANCIAL CONDITION At December 31, 1996, the Company's cash, cash equivalents and short-term investment balance was $112,000, as compared to $540,000 at September 30, 1996. At December 31, 1996, the Company had no material commitments for capital expenditures. At December 31, 1996, working capital decreased $239,000 from September 30, 1996, and the Company's current ratio decreased to 1.38:1 from 1.42:1 over the same time period. As of December 31, 1996, the Company had $185,000 in principal outstanding under a bank line of credit ("line"). The maturity date of the line was January 15, 1997, and no further borrowings are permitted. The line bears interest at the bank's prime rate plus 3% per annum, provided that the interest rate in effect each month shall not be less than 10% per annum, and is payable monthly (11.25% as of December 31, 1996). The line contains various restrictive covenants requiring, among other matters, the 7 EIP MICROWAVE, INC. PART I/ITEM 2--MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION (CONTINUED) maintenance of minimum levels of tangible net worth and profitability and certain financial ratios, including minimum quick ratio and maximum debt to net worth ratio. The line also precludes or limits the Company in taking certain actions, such as paying dividends, making loans, making acquisitions or incurring indebtedness, without the bank's prior written consent. The line is secured by substantially all of the Company's assets. As of December 31, 1996, the Company was not in compliance with certain restrictive covenants of the line. The Company has requested that the bank renew its line through January 1998 with an amendment of the restrictive covenants and an increase in available borrowing to $500,000. In the event that the line of credit is not renewed, or the Company is unable to maintain compliance with financial covenants, J. Bradford Bishop, the Chairman and Chief Executive Officer of the Company, and John F. Bishop, the Vice Chairman, Treasurer and Secretary of the Company (the "Bishops") have agreed to finance up to $500,000 of working capital, in addition to funds provided under the Subordinated Loan Agreement (described below), on terms acceptable to the Bishops and the Company to replace the line of credit. On January 10, 1997, the Bishops loaned $250,000 to the Company. On February 7, 1997, the Bishops loaned an additional $250,000 to the Company. The entire $500,000 in aggregate principal and accrued interest thereon is due and payable by the Company on April 10, 1997. Interest is charged at 10% per annum. The loans are secured by substantially all of the assets of the Company and the Bishops have agreed to subordinate these loans to the Company's bank line of credit. If all principal and interest is not paid in full on April 10, 1997, then, at the option of the Bishops, the outstanding amount will be deemed to be repaid by the Company by an advance from the Bishops under the terms of the Subordinated Loan Agreement (described below). In such event, the Bishops will be entitled to repayment of the advance under the terms of the Subordinated Loan Agreement, and the warrants granted to the Bishops thereunder will become exercisable under the terms thereof based on the amount of such advance. The Company and the Bishops are parties to a Subordinated Loan Agreement dated December 16, 1996. This agreement provides for borrowings up to a maximum aggregate amount of $600,000 by the Company. The commitment of the Bishops to make advances to the Company expires on February 1, 1998, and all advances must be repaid by February 1, 2000. Interest is charged at 8% per annum, and is payable quarterly. The advances are secured by substantially all of the assets of the Company and the Bishops have agreed to subordinate their advances to the Company's bank line of credit. The agreement contains various restrictive covenants. In connection with the Subordinated Loan Agreement, the Company will issue warrants entitling the Bishops to purchase up to 90,000 shares of the Company's common stock at $3.00 per share. The warrants will expire on December 16, 2001. Future operating performance and levels of capital expenditures could reduce the total amount of funds available under the bank line of credit (if renewed) and the Subordinated Loan Agreement. The Company believes that the cash on hand, funds generated from operations, funds available under a renewed or replaced bank line of credit and the Subordinated Loan Agreement will provide for the cash requirements for fiscal 1997. 8 EIP MICROWAVE, INC. PART I/ITEM 2--MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION (CONTINUED) CERTAIN FACTORS IN ADDITION TO THE FACTORS DISCUSSED ELSEWHERE IN THIS QUARTERLY REPORT ON FORM 10-QSB, THE FOLLOWING ARE IMPORTANT FACTORS WHICH COULD CAUSE ACTUAL RESULTS OR EVENTS TO DIFFER MATERIALLY FROM THOSE CONTAINED IN ANY FORWARD-LOOKING STATEMENT MADE BY OR ON BEHALF OF THE COMPANY. PRODUCT DEVELOPMENT AND INTRODUCTION The Company expects to continue to invest in research and development of new products, and anticipates the introduction of a new frequency measurement product in fiscal year 1997. Due to the uncertainty associated with any product development and introduction (such as delays in development and lack of market acceptance of the new product), there can be no assurances that the Company's development and introduction efforts will be successful. If the Company does not successfully introduce a new frequency measurement product in fiscal year 1997, the Company's business, financial condition and results of operations will be materially adversely affected. LIQUIDITY The Company's fiscal 1997 operating plan assumes that additional financing will be necessary to fund its 1997 operations. The Company has requested that the bank renew its line of credit through January 1998 and increase its availability under the line of credit to $500,000 (see description under "Financial Condition" above). The inability to successfully renew the bank line of credit with the availability requested by the Company could have a material adverse effect on the Company's business, financial condition and results of operations. If the Company is unable to secure an alternate source of capital, it may be required to significantly curtail its planned operations. Although the Company believes that its existing and available cash resources, together with the requested availability under a renewed or replaced bank line of credit and the Subordinated Loan Agreement, should be sufficient to meet its needs for fiscal year 1997, there can be no assurance that such cash resources will be sufficient to satisfy the Company's operating requirements. The actual cash resources required will depend upon numerous factors, including those described under "Product Development and Introduction" above and "Other Factors" below. OTHER FACTORS The Company's results of operations are also affected by a wide variety of other factors, including fluctuations in customer demand, competitive factors (such as pricing pressures on existing products and the timing and market acceptance of new product introductions by competitors of the Company), and both general economic conditions and conditions specific to the microwave and RF test and measurement industry. Due to the foregoing and other factors, past results are not a reliable predictor of future results. In addition, the securities of many technology and developmental companies, such as the Company, have historically been subject to extensive price and volume fluctuations that may adversely affect the market price of their common stock. 9 EIP MICROWAVE, INC. PART II--OTHER INFORMATION ITEM 2. CHANGES IN SECURITIES The Company's bank line of credit contains restrictions on dividend payments and other restrictive covenants regarding, among other matters, the maintenance of minimal levels of profitability and tangible net worth, minimum quick ratio and limits of debt to net worth. The Company's Subordinated Loan Agreement contains restrictions on dividend payments and other restrictive covenants. The bank line of credit and the Subordinated Loan Agreement are more fully described in Part I/Item 2--Financial Condition. ITEM 3. DEFAULTS UPON SENIOR SECURITIES As of December 31, 1996, the Company was in default under its bank line of credit. The bank line of credit, among other restrictive covenants, prohibits the incurrence of losses by the Company in excess of $120,000 for the quarter ending December 31, 1996. The Company's actual loss for such quarter was $222,000. The principal amount outstanding under the existing credit facility was $185,000 as of December 31, 1996. All principal and interest under the bank line of credit was due and payable on January 15, 1997. The Company repaid $34,500 of the outstanding principal amount on January 15, 1997. The remaining principal amount outstanding on January 15, 1997 was $150,500. The Company has requested that the bank renew its line of credit through January 1998 with an amendment of the restrictive covenants and an increase in available borrowing to $500,000. The bank line of credit is more fully described in Part 1/Item 2--Financial Condition. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS (a) No matter was submitted to a vote of the security holders during the period covered by this report, through solicitation of proxies or otherwise. (b) Subsequent Event Disclosure: The Company held its Annual Meeting of Stockholders on February 5, 1997. Two items were voted on by the stockholders. (1) Mr. John F. Bishop and Mr. J. Bradford Bishop were re-elected as Class I members of the Board of Directors with terms expiring at the 2000 Annual Meeting. The votes cast for or withheld for the nominees were as follows: For--355,671; Withheld--11,605. Michael E. Johnson and J. Sidney Webb, each a Class II director, and Robert D. Johnson, a Class III director, were not up for re-election and continue in office. (2) The stockholders approved the Company's Second Amended and Restated 1994 Stock Option Plan, as adopted by the Board of Directors. Vote to approve as follows: For-- 240,598; Against--25,362; Abstain--790; Broker Non-Votes--100,526. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 27 Financial Data Schedule. (b) Reports on Form 8-K. The Company did not file with the Commission any reports on Form 8-K in the quarter ended December 31, 1996. 10 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. EIP MICROWAVE, INC. (Registrant) DATE: February 12, 1997 BY: /s/ J. BRADFORD BISHOP ---------------------------------------- J. Bradford Bishop CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER DATE: February 12, 1997 BY: /s/ LEWIS R. FOSTER ---------------------------------------- Lewis R. Foster PRESIDENT AND CHIEF OPERATING OFFICER DATE: February 12, 1997 BY: /s/ JOHN F. BISHOP ---------------------------------------- John F. Bishop VICE CHAIRMAN, TREASURER AND SECRETARY (PRINCIPAL FINANCIAL OFFICER)
11 EIP MICROWAVE, INC. INDEX TO EXHIBITS
SEQUENTIALLY EXHIBIT NO. DESCRIPTION NUMBERED PAGE - ----------- ------------------------------------------------------------------------------------ --------------------- 27 Financial Data Schedule 13
12 EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS SEP-30-1997 OCT-01-1996 DEC-31-1996 86 26 503 50 1,002 1,634 5,374 4,734 2,274 1,182 0 0 0 5 1,000 2,274 1,258 1,258 793 793 687 0 0 (222) 0 0 0 0 0 (222) (.52) (.52)
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